Overrated

It seems only yesterday that the deadly threat from Japan popped up all over the media. Books with titles like Trading Places implied that the Japanese were poised to supplant us as the world’s leading economy, while others with titles like Japan as Number One implied that this had already happened. There were didactic novels about it; one, Rising Sun , a thriller by Michael Crichton, even made money as a Hollywood film. The threat from Japan was directed at the U.S.A. in particular and at the West in general and was understood in various ways, with different levels of sophistication. The Japanese could be crudely described by a future French prime minister, Edith Cresson, as “ants” who “stay up at night thinking up ways to screw Americans and Europeans”; more academic responses saw our enemy to be a new and devastatingly effective “industrial policy,” or one or another cant phrase for neomercantilist paranoia.

The Japanese, we were told, understood that free trade was simply national suicide. Their government channeled resources to the most efficient sectors, backing the upcoming national industrial champions with cheap capital while shielding them from import competition. Japanese bureaucrats could pick winners, and did; our economy had stopped being competitive in silicon chips while our stock market and legal culture funneled resources to the makers of potato chips. Japanese schools produced useful engineers, ours produced parasitic lawyers. We were a classical case of an overstretched Great Power in decline.

Nowadays, of course, Japan is seen as an aging, stagnant, and paralyzed economy, its “industrial policy” a disaster. Even as we become less cocky about our own economy—that is, as recession looms and the dot-coms are reimagined as Ponzi schemes that took in even their own devisers—no one has yet reinflated the threat from Japan.

Underrated

The phrase national economic threat always has to it a whiff of xenophobia; states may be political or military antagonists, but under normal conditions they are not competitive actors in the international economy. But insofar as important constituencies in America continue to imagine that China presents the greatest economic opportunity since the steam engine, this vision of China is a threat to American economic and political prudence. Americans have been reading and writing books about the vast economic opportunity represented by China for the better part of a century (back when there were only a fraction as many Chinese, a popular business book was titled Four Hundred Million Customers ). But large numbers do not automatically make for effective demand.

The Chinese regime is obviously interested in expanding some economic ties with the United States, and it has no discernible hostility to its citizens’ selling America toys made by forced labor or stealing intellectual property. But what other real opportunities are there? Chinese growth rates, which seemed astonishing a couple of years ago, may not be